New Jersey
Acting Attorney General Matthew J. Platkin and the Division of Consumer Affairs announced today that the New Jersey Bureau of Securities has issued a Summary Cease and Desist Order requiring a Russian website operator to stop offering securitized non-fungible tokens (Securitized NFTs) in violation of New Jersey law – action taken in coordination with four other state securities regulators.
The fraudulent Securitized NFTs purportedly convey ownership and the right to share in the profits of a “metaverse” casino.
The subject of the order, Flamingo Casino Club (Flamingo), conducts its business on the internet through its website and social media presence on YouTube, Instagram, Twitter, Telegram, and Discord.
The Flamingo website was procured and paid for from an IP address in Russia in March 2022.
The Bureau found that Flamingo made numerous misrepresentations and omissions of material fact.
For example, Flamingo did not disclose its location to potential investors in its Securitized NFTs and provided falsified information to secure web hosting services.
Specifically, Flamingo by provided the web hosting service with a fake address in Rochester, New York, a zip code in Florida, and a phone number that is not in service.
In addition to New Jersey, the Flamingo investigation announced today is in coordination with financial and securities regulators representing Alabama, Kentucky, Texas and Wisconsin.
According to the Order issued in New Jersey today, Flamingo purports to offer and sell the Securitized NFTs to raise capital to develop a virtual casino in the metaverse. This term generally refers to one or more interconnected virtual worlds that promote interactivity, entertainment and commerce.
Through digital representations known as avatars, Flamingo indicates that patrons will be able to gamble in the metaverse casino by playing craps, palace baccarat, mini-baccarat, blackjack, and roulette and that the metaverse casino will also include a virtual stadium, a virtual hotel , a virtual cinema, and host virtual hockey matches.
“As legitimate businesses and investors explore opportunities made possible by new technologies, we are closely monitoring how interest in these new products attracts scammers who offer no more than lies and a black hole for retail investors’ hard-earned money,” said Acting Attorney General Platkin.
“While my office works to identify and stop similar schemes in their tracks, we also want investors to be aware of the risks.”
NFTs are digital assets with a unique identifier that exist on blockchains and can represent a real-world or digital asset like art and real estate.
The Securitized NFTs are similar to shares of stock, and other equities in that Securitized NFTs purportedly provide investors with ownership of Flamingo and the right to passively share in half the profits generated by the metaverse casino.
The Securitized NFTs are securities as defined by NJSA 49:3-49(m). However, they are not registered with the Bureau, federally covered, or exempt from registration.
“Registration requirements and other regulations safeguard investors from fraudulent schemes that may shut down without a trace, and those operating in the metaverse are not exempt,” said Howard Pine, Acting Director of the Division of Consumer Affairs.
“As we take this action to protect investors, we urge New Jerseyans to do their homework and avail themselves of our free resources to learn more about investing.”
The Bureau found that Flamingo has been engaging in fraud in connection with the offer of securities that includes:
- Misrepresenting that it has a partnership with the Flamingo Las Vegas hotel and casino and other casinos operated in Las Vegas, Nevada.
- Misrepresenting Flamingo’s press releases on MarketWatch and Yahoo Finance as independently endorsing Flamingo and its Securitized NFTs.
- Failing to provide sufficient information to permit investors to independently verify that the team managing Flamingo actually exists.
- Failing to provide investors with information relevant to its purported negotiations to purchase virtual land from Snoop Dogg.
“Entities that hide or misrepresent their true location and contact information should be a red flag for any investor,” said Acting Bureau Chief Amy G. Kopleton.
“It is important to know the risks of buying unregistered securities such as the Securitized NFTs and investing in similar new opportunities. We ask investors to do their part to protect their money by looking past the hype and high return promises.”
The Order also finds that Flamingo relies on social media influencers to promote the fraudulent Securitized NFTs.
For example, an influencer known as Tommy – who is not a financial advisor or licensed to act as an agent for Flamingo – published a video on YouTube touting the profitability of the Flamingo metaverse investment scheme that has been viewed almost 40,000 times.
The Bureau’s investigation was handled by Investigator Delfin Rodriguez.
